A friend of mine is learning to play the guitar. This wasn’t something that was initiated by lockdown, although he did say it was undoubtedly part of his ‘mid-life crisis’. He first took it up about five years ago, to which you might ask, is he still learning? I suspect the answer to that would be, ‘You’re always learning’.
He recently talked me through what it was like to a learner, especially one that has had long periods when he’s not been as committed to his instrument as he should. Put it this way, in the words of the great Nile Rogers of Chic-fame, “If I don’t practice one day, I notice; two days, you notice.” Months of no practice with the guitar gathering dust? It doesn’t bear thinking about.
Of course, when it comes to labour-intensive interests in your older years, life often gets in the way. It’s probably why there are few middle-aged wunderkind guitarists who only took it up when they were north of 40. When you’re younger, you tend to have more time to practice.
Anyway, for better or worse, his description of his guitar ‘journey’ pretty much involved moving two steps forward, not practising for a length of time, and then having to relearn a lot of what he’d already done. It seemed like a constant uphill battle, with the added ‘benefit’ of bleeding fingertips.
Amateur guitarists might have a lot in common with the current generation of potential first-time buyers, particularly those who might have thought they’d be in a position to purchase over the last 12-18 months.
How many of those wannabe owner-occupiers might have thought they were progressing well, only for life – particularly the pandemic – to throw a real spanner in the works, and that belief simply ebbs away.
For example, consider the first-timer who pre-COVID had a 5% deposit saved. Now, pre-March last year, the market wasn’t exactly bubbling over with 95% LTV deals but they were certainly more plentiful than the half-a-dozen or so products currently available. And all those now require parental support/guarantors that many first-timers simply wouldn’t be able to count on.
Perhaps however our first-timer is one of the lucky ones, perhaps the pandemic hasn’t been as financially crippling as it has for them. Perhaps they were lucky to have kept their job, and still potentially saved a bit more towards their deposit? Perhaps in Autumn last year they had now achieved a 10% deposit, only to find that many lenders had left this particular product space for safer, less riskier, climes 85 was the ‘new’ 90?
A few months on, having waited for the market to show greater signs of normality, perhaps they would have read about a number of lenders moving back into 90% LTV lending. A trickle which started in December has become a much steadier stream. And yet, what is the cost of those mortgage products? Considerably more than they would have paid for a 95% LTV loan in the not-so-distant past, with no guarantee that they would meet the stricter affordability criteria set out. A combination which may now see those products still out of reach because they couldn’t make the monthly mortgage payment, even though they may currently be paying more in rent each month.
All of this, of course, going on throughout a period when the supply of properties to purchase is not exactly plentiful and when a, combination of pent-up demand and the stamp duty holiday, will have delivered a much-more competitive housing market for them to be trying to purchase in. Perhaps there has been an influx of new buyers into their region because of the pandemic and the work/life balance it has upset for so many people. Perhaps what seemed like an up-and-coming area has been inundated with new ‘outsider’ interest?
In that regard, it’s no wonder that a recent survey by Aviva said seven in 10 would-be first-timers had needed to rethink their plans for purchase over the last year. One in three of the 6,000 UK adults asked said they had planned to buy last year, but less than one in 10 (9%) actually had.
Does 2021 look any better for them? Well, potentially with more competition and better pricing at higher LTV levels, although the likelihood of this extending to 95% LTV anytime soon, still looks very slim. And maybe the post-SDLT holiday will move the market slightly more in their favour? Perhaps there will be a drop-off in activity that lenders will need to address with much more competitive high LTV offerings, and perhaps prices will stabilise a little in order to make them more affordable to these would-be owners? Perhaps the lending targets set at the tail-end of 2020 will require significant recalibration in order to be achieved?
But the likelihood is that, as time moves on, the situation doesn’t really get all that easier. Much like my guitar-playing compadre, it’s a case of the earlier the better, but those ‘Glory Days’ (to quote The Boss) may well be in the past forever. Lenders could undoubtedly help by reviewing and updating their high LTV options which will make a difference for some, but becoming a first-time buyer is – much like learning an instrument or a language – probably going to take a lot of blood, sweat and tears.
Time to play the blues?
Patrick Bamford is business development director at AmTrust Mortgage & Credit